Jul 28, 2008

India - 10 to 20% of CEOs fail Trust Vote

NEW DELHI: India Inc is not quite as fortunate as the government, with a disturbing 10% to 20% or more of its top leadership losing the trust vote for reneging on contracts and commitments. According to the top global executive search firms in the country, a growing number of India's best paid and most sought after executives are revealing a dark, opportunistic and irresponsible side, accepting plum offers in the CEO, CXO series and then failing to show up at work on the joining date because they have used the first offer to negotiate a better deal, either with their present employer or in another company. The number of such betrayals, which comes at a huge cost to all stakeholders, is staggering. What's worse, the rate of default appears to be directly proportional to the rate at which firms transform from national players to transnational or global organizations. According to estimates, India's top seven executive search firms collectively handle roughly 705 senior search mandates annually, of which 60% or 423 are for CXOs. Of these, 10% to 20% or as many as 85 walk away from the commitment at the very last minute. Shockingly, often without prior intimation. "The numbers will be even larger if we include data from smaller executive search firms," Uday Chawla, managing partner, Transearch India, told TOI . "This last minute betrayal is not directed just at Indian firms, but MNCs as well. The confidentiality of the search process and the huge demand for leaders is making candidates reckless about spoiling their relationships within the industry," says Sanjiv Sachar, partner, Egon Zehnder International. In a way, it can be said that India Inc is facing challenge in dealing with the betrayals from top executives. "The fact that senior talent is finding it so easy to break away from professional ethics, especially as Indian firms globalize, is a major challenge confronting India Inc," admits Arun Mahapatra, partner-in-charge, Heidrick & Struggles. "Success, for a politician, is measured by his ability to win votes; for a businessman, it is the value of his assets; but for a professional, it is the respect that he commands. To wilfully choose greed over respect is professional harakiri," says Sachar. It takes a minimum of three to four months to close a search, with search firms either charging a retention fee of up to Rs 50 lakh per mandate or 33.3% of the candidate's cost-to-company. After this, the candidate could take between three to six months to join, depending on the notice period he is required to serve in his current place of work. When he fails to show up in the new workplace, the process starts afresh, which means a further eight to ten months delay and a crippling leadership vacuum that affects mission-critical business expansion. "In one case, first class travel for the new CEO was organized across Europe and the US, internal company announcements were sent out to prepare the team for his arrival, a welcome party and briefing sessions scheduled. The candidate did not show up on the day that he was to join and even refused to answer our calls," says a search consultant. "Financial damage is just one dimension. The company's board starts to challenge the chairman and the hiring team about the value proposition of getting external talent. It is a terrible loss of face for all concerned," says Sachar. While such candidates are blacklisted for life within the search firms, the fact that there is no sharing of information about such individuals within the industry allows these defaulters an easy getaway. Preety Kumar of Amrop disagrees, "It is a small world. These people are building up a history of default that will catch up with them eventually. It is just a matter of time."